Why banks face supply chain risk

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Banks have taken quite a bashing over the past few years. First there were the heavy (and for some, continuing) losses, then there was payment protection mis-selling and the Libor scandal, plus the ongoing rumblings about the bonus culture.

Now, they are being taken to task over their supply chains in a new report from the Information Services Group entitled “The ‘Uh Oh’ moment: financial services enterprises focus on governance, transparency and supply chain risk”.

It argues that many financial services organisations are ill-equipped to manage risk in their supply chains and poorly prepared to face increased scrutiny from regulatory bodies.

“Financial services institutions face significant supply chain risks due to their reliance on elaborate networks of first, second and third tier suppliers to manage critical processes and operations,” according to Peter Lauer, partner at US-based ISG.

And he goes on to argue that banks and insurers often don’t know what they don’t know about their supply chain risks. “While they may have processes and reporting requirements defined, significant gaps exist between what’s documented and what’s actually used to make decisions and manage suppliers and service delivery.”

There is a familiar sound to this – managing complex networks, dealing unknown unknowns, and so on. And even the solutions proposed by ISG have a familiar ring – greater collaboration with supply chain partners and building a holistic of service delivery.

We tend to associate supply chain risk with manufacturers and retailers, but this report makes it clear that no organisation is immune.  And it highlights the fact that the requirement for strategic thinking on the supply chain goes both wider and deeper than many people realise.

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